UPDATE 1-AIG names Liddy as CEO, not planning liquidation

(Adds detail on comments Liddy made to employees)

NEW YORK, Sept 18 (Reuters) - American International Group Inc (AIG.N), which narrowly escaped financial collapse this week, on Thursday said it had named Edward Liddy as chairman and chief executive.

Liddy succeeds Robert Willumstad, who is leaving after three months on the job, and in the wake of AIG -- once the world's largest insurer -- agreeing to an $85 billion rescue plan from the U.S. Federal Reserve.

"My intention is not to liquidate the company," said Liddy, speaking with employees on Thursday, according to a source who heard the comments.

Liddy also said AIG's insurance operations were well funded, and that the company's "mess is solvable."

AIG, at the end of 2007, had 116,000 employees in operations throughout 130 countries and territories.

As part of the federal bailout, AIG will have to repay monies borrowed from the government by selling assets or units.

Liddy said AIG had to move quickly to decide what should be sold, or risk being hurt further.

Liddy was formerly chief executive of large U.S. home and auto insurer Allstate Corp (ALL.N). (Reporting by Lilla Zuill; Editing by Phil Berlowitz, Bernard Orr)